What are the economic and investment implications of higher tariffs

Investing.com -- The possible reintroduction and increase of tariffs in the United States, especially with the 2024 presidential election approaching, could have major effects on the economy and investments.

According to UBS, the inflationary impact of tariffs is straightforward but significant. “Thus a 10% universal tariff applied to imports to the US should raise overall price levels in the US economy by 1.3%,” the analysts said. Under scenarios where selective or universal tariffs are imposed, UBS forecasts a negative cumulative impact on GDP over three years. For example, the U.S. GDP could decline by 1.0% to 1.5% under a universal tariff scenario.

UBS analysts anticipate that higher tariffs, particularly if applied universally, would put downward pressure on U.S. equities. The imposition of a 10% universal tariff, along with corresponding retaliatory measures, could lead to a decline in U.S. equity markets by about 10%.

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